ALL OF THIS morning's papers discuss Aviva's proposed takeover offer for rival company Prudential.
According to The Daily Telegraph, Aviva has confirmed details of its £17bn proposed offer for Prudential and said it would not be willing to make a hostile offer for the group.
However, Prudential has already rejected the indicative approach and told Aviva, owner of Norwich Union, it is not prepared to enter talks. Aviva said today’s statement, outlining the prospective offer, “enables both Prudential and Aviva’s shareholders to assess the proposal on an informed basis”.
It is proposing an all-share merger of the two groups with 82 new Aviva shares issued for every 100 Prudential shares held. The offer is equivalent to 708p per Prudential share, valuing the company at around £17bn. Prudential rose 80p to 752p in early trading, after gaining 44½p on Friday, prompting speculation that Aviva could face a rival bidder.
Aviva said it would only proceed with the proposal “on a recommended basis”. However, Prudential said in a brief statement this morning that it “does not consider the proposal is in the best interests of its shareholders and has rejected it.”
The company added: “The board confirms that it is not in discussions with any party and reaffirms its confidence in Prudential’s future as an independent company.”
BUT INVESTORS IN Prudential will today get their chance to quiz its senior management over their decision to rebuff the bid at the end of last week, reports The Guardian.
Prudential, Britain's second-largest life insurer, has a series of routine meetings scheduled with shareholders to discuss its full-year results, which were released last week. But the paper claims the meetings will be anything but business as usual as investors seek more detail on Aviva's informal offer.
Aviva is also planning to sound out support among Prudential investors for its bid in the next few days. Aviva executives, led by Richard Harvey, were locked in meetings yesterday to consider their next move, including a possible increase in the offer price of 700p a share. One insider said a full range of options was being discussed, although he played down the chance of the bid turning hostile.
Aviva also owns Commercial Union, the RAC and General Accident and a combination with Prudential would create a £34bn company offering life and general insurance.
Harvey told the Prudential management he hoped to build a national champion. But the offer could flush out other bidders, possibly including the French insurer Axa and the American outfit AIG.
The battleground will now shift to the firm's largest shareholders as UBS, Schroders, Merrill Lynch and Legal & General hold large stakes in both companies and could play a crucial role in the outcome.
Aviva argues the two companies would make a neat fit as Prudential has strengths in the United States and Asia to complement Aviva's flourishing business in Britain and mainland Europe.
Despite being the two largest insurers in Britain, the market is so fragmented their combined market share would be unlikely to ring alarm bells for regulators. A combined Aviva and Prudential would have more than 50 million customers, 80,000 staff and £350bn under management.
THE FINANCIAL SERVICES AUTHORITY will find it difficult to attribute blame for market abuse to City staff even after uncovering apparently widespread insider trading, say lawyers, reports The Financial Times.
The City regulator reported last Friday 29% of takeover bids in 2004 were preceded by likely insider trading on the stock market and signalled a re-invigorated drive to crack down on market abuse.
Lawyers praised the FSA for producing a new measure of "market cleanliness", which will be updated periodically and is the first of its kind from a regulator. But in spite of one recent success for the regulator's enforcement arm, they were sceptical of its longer-term ability to establish deterrents by nailing high-profile market participants.
The regulator has pledged to bear down on abuse by secretive hedge funds, investment banks and their employees, as opposed to corporate wrongdoers, and to dish out bigger fines.
In 2004-05, most FSA market abuse cases were against smaller fry, involving five-figure fines for a finance director, a company secretary, a head of communications and an auditor among others.
Hector Sants, the FSA's managing director in charge of wholesale and institutional markets, has said the growing volume of hedge fund trading has caused a structural change in the market and increased the risk of market abuse.
Acknowledging the FSA's first small-scale enforcement cases in 2004 did not appear to have deterred insider trading, he said: "This suggests that visible enforcement action may be the key tool in our work to reduce market abuse."
CORPORATE TREASURERS are braced for a new crackdown on tax avoidance by companies this week as Gordon Brown prepares for a new campaign to squeeze more revenue from their profits, reports The Times.
HM Revenue & Customs wants to close off loopholes which finance directors and corporate lawyers have exploited to reduce firms’ tax bills. Plans already set out in the Pre-Budget Report aim to collect an extra £2.2bn over the next four years by outlawing a range of schemes.Corporate tax specialists fear the screws will be tightened further in the Budget on Wednesday.
The Chancellor has given himself the power to pass anti-avoidance laws with retrospective effect and has introduced a system which compels companies to inform the Revenue of any complex and untested tax systems they are using. These powers have thrown businesses on the defensive, according to Grant Thornton, the financial adviser.
Stephen Quest, tax partner at Grant Thornton, pointed to a study of the 100 biggest companies showing directors’ greatest concern for their tax experts is they do not have their firms’ tax affairs retrospectively declared illegal.
Non-compliance investigations can be costly for firms as Grant Thornton estimates full inquiries last an average of 71 weeks and 80% of them lead to additional tax charges.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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